Managerial Ability and Forecast Accuracy
Journal of Modern Accounting and Auditing, Forthcoming
Posted: 26 Dec 2017 Last revised: 4 Jan 2018
Date Written: December 20, 2017
We examine the relation between managerial ability and management forecast accuracy. We find that forecast accuracy is positively associated with managerial ability in the case of sales forecasts. Specifically, more able managers are associated with lower magnitude’s forecast errors in the case of sales forecasts. Additional analysis finds that managerial ability is immaterial to EPS figures’ forecast accuracy; i.e. EPS forecasts appear not to be affected by manager’s superiority. Regarding sales forecasts, the results are consistent with the assertion that managers impact the quality of the delivered management forecasts. Regarding EPS forecasts, the results are in alignment with Demerjian et al. (2013) who highlight that managerial ability is an ability score related to the entire management team.
Keywords: Managerial Ability, Management Forecasts, Forecast Error
JEL Classification: G24, G28, M41
Suggested Citation: Suggested Citation